£500 million paid out in PPI compensation in March

Lenders paid out £500 million compensation in March to victims of payment protection insurance (PPI) mis-selling, the highest single month of redress in 2012.

The Financial Services Authority announced the official figures today, which push the total paid out since the start of last year past £3.5 billion. The overall record monthly payout was £536 million in December 2011.

However with an estimated total bill of £9 billion to compensate all victims, the process is far from over.

Earlier this month, Lloyds, RBS and HSBC set aside £800 million extra between them, on top of their original pots to pay out from.

There has been a huge jump in compensation since the British Bankers' Association trade body ended a legal battle in May 2011 which attempted to block the FSA's rules on compensation.

These rules force banks to review past sales of PPI – to cover loan or credit card payments when people cannot work – and contact those mis-sold to offer money back, even to borrowers who have never complained.

The independent Financial Ombudsman Service, which arbitrates in disputes between banks and their customers, says on average those who receive compensation get £2,750 each.

It upholds three out of four cases in the customer's favour, telling the business to pay compensation.

How to claim

If you've had a loan or credit card and were told PPI was compulsory, had it added without consent, were self-employed, unemployed or retired, it's likely you were mis-sold the insurance and can get the money back even if the debt's been repaid.

You may not even know you had or have PPI so check statements carefully. It is sometimes referred to as 'payment care', a 'protection plan' or 'protected loan'.

If you feel you were mis-sold PPI, complain to the firm that sold it. If you are rejected or do not get a satisfactory response within eight weeks you can take your complaint to the Ombudsman.

Banks are unlikely to contact everyone, so you could miss out if you don't act.

The FSA's data comes from 24 firms, which account for 96% of the complaints made over PPI.

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